Return on Assets in Farms and the Context of Economic Rationality in Poland and Selected European Union Countries

Aleksander Grzelak

Roczniki (Annals), 2023, vol. 2023, issue 4

Abstract: The main aim of the article is to evaluate the rate of return on assets in farms from the perspective of economic rationality. The research concerned farms covered by the FADN system in Poland and 25 European Union countries. The temporal scope of the analyses referred to the period 2010-2020. As a general rule, in the EU countries, the market rate of return is higher compared to that achieved on average by farms. This is especially true for smaller farms. From the perspective of the neoclassical approach, this would indicate an irrational operation. Farmers implement a multi-criteria objective function. In doing so, they agree to achieve relatively lower agricultural income in exchange for diversification of risk, an increase in asset value, or meeting household needs (not only consumption). Agricultural producers become more wealthy due to the increase in land prices. Hence, from this perspective, farmers’ actions could be seen as rational, which is more in line with the classical view in economic theory, where the aim of subjects to maximize wealth by units was emphasized. Therefore, the achievement of low rates of return by agricultural producers in a situation where agricultural income does not provide a fee for the farm family members’ own labor should not be evaluated unequivocally as a manifestation of a lack of rationality.

Keywords: Agribusiness; Agricultural Finance; Farm Management; Productivity Analysis (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:paaero:340074

DOI: 10.22004/ag.econ.340074

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